Inheriting farmland would be less costly under proposed legislation that cleared the Revenue Committee last session and has support from the agricultural community.

Working soil to grow vegetables or graze livestock is generally far less lucrative than what a farmer could earn by selling the property to a developer. But when a farm owner dies, the land is assessed at its "highest and best use" for the purposes of estate tax collection, Brad Mitchell, deputy policy director of the Massachusetts Farm Bureau, told lawmakers at a hearing May 1.

Mitchell said this can translate into significantly higher valuation, forcing heirs to sell farmland to developers.

"Farmers tend to be land-rich and cash-poor," Mitchell said. "We're seeing land go out of agriculture because of this requirement, this highest and best use."

State Rep. Kate Hogan, a Stow Democrat, said the highest and best use – or the most profitable use of the land – is development, not agriculture.

“As a result, many people inheriting farmland end up selling portions of their land in order to pay for the large estate tax,” she said.

Hogan, and Newburyport Democrat Sen. Kathleen O'Connor Ives, recently proposed legislation that would offer a person inheriting farmland options for how their estate is taxed.

When a person inherits farmland, both the agriculture use value and the highest and best use value of the land would be determined. The person who inherited the farm could then choose to have the land valued based on its current agricultural use for the purposes of estate taxation, which would be lower, Hogan said.

If the owners sell the land within 10 years, for purposes other than agriculture, they would then have to pay back taxes for the remaining period of the 10 years.

“Those back taxes would bridge the difference between the lower estate tax bill, based on the land’s agricultural value, paid at the time of inheritance, and the more expensive, highest and best use value, that was also determined but not paid,” said Hogan.

The change, Hogan said, would give heirs an opportunity to keep the farmland in agriculture without being required to pay an estate tax they can not afford.

“This bill looks to the future of agriculture in Massachusetts by protecting family farms across the commonwealth,” said Hogan, who represents the Third Middlesex District. “As a legislator representing dozens of farms – including apple orchards, Christmas tree farms, nurseries, and wineries – I know how vital multi-generation farms are to our communities’ economy and character.”

There are close to 30 farms in the Third Middlesex District, which is comprised of the towns of Bolton, Hudson, Maynard and Stow. Last fall, Hogan hosted an orchard tour of the district with Massachusetts Department of Agricultural Resources Commissioner John Lebeaux to take a look at local orchard operations and discuss initiatives to support farmers, orchards and regional heritage.

Andrew Martin, owner of Honey Pot Hill Orchards in Stow, is hopeful the new legislation will pass.

“Unfortunately, for most farmers, ourself included,” he said, “your land is your biggest asset and in a lot of cases if [a farmer dies] owning it still, that is taxed and [the new owners] end up having to sell off some of the land to pay the taxes.”

Martin said the term “best use” is also misleading, because who is to say a housing development is the best use of a property. He believes a better use is farming or open space. In addition, taxing farmland as if it were a housing development, is unfair, he said.

“Why would you tax it as something else, until it becomes something else,” he said. “It forces [the land] to become non-open space because people can’t afford to pay the taxes.”

Ken Nicewicz, owner of Nicewicz Family Farm in Bolton, said he believes Hogan’s legislation will promote agriculture and family farms in Massachusetts.

“So many of our farms in the past were lost in order to pay estate taxes,” he said. “With Kate’s helpful legislation, if enacted, farms would be able to transfer ownership without burdensome estate taxes, keeping farms intact in families who would continue the long family farm tradition.”

Mitchell said the 5.25 percent estate tax kicks in at $1 million. Estate inheritance tax receipts for fiscal 2018 were estimated at $402.9 million in the House version of the annual budget. The estate haul has soared from the $261.7 million expectation built into the fiscal 2014 budget.

In Littleton, where Mitchell lives, he said a woman owns 60 acres that is probably valued at around $800,000 for agricultural use but could be valued around $20 million for development.

"That's a lot of corn or tomatoes. So you literally can't afford to do it," Mitchell said. "Farmers typically like to hold onto their land. It's a legacy. It's part of what they do."

According to the 2012 U.S. Department of Agriculture farm census, there were 523,517 acres of Massachusetts farmland that year, a decrease from the 577,637 acres recorded in 1997 but an increase over the 2007 census. Over the same period, the average size of a farm decreased from 79 acres to 68 acres. There were 113 farms of 500 acres or more.

The locally sourced food movement has gained popularity over the years. According to the UMass Amherst Center for Agriculture Food and the Environment, the total value of agricultural products sold directly to Bay State consumers increased by 14 percent from 2007 to 2012.

In terms of direct sales per farm, Massachusetts ranks second behind Delaware with an average of $21,718 per farm, according to the school's census analysis.

Information from Andy Metzger of the State House News Service was used in this report.